JUDGMENT
Permod Kohli, J.
Page 2400
1. Respondent No. 1 proposed to construct a Bazar Complex at Main Road, Ranchi for commercial purposes. It issued a brochure giving the salient features of the proposed complex. As many as 29 shops were proposed to be constructed. Out of 29 shops, 23 shops were reserved for General Category, 3 shops numbering 3, 10 & 13 for Scheduled Tribe, 1 shop No. 26 for Scheduled Caste, 1 shop No. 6 for Physically disabled person and 1 shop No. 27 for woman. The shops were allotted by drawing lottery from the names of the applicants preferring allotment of the same. The period of allotment was on long lease of 66 years renewable thereafter at the discretion of Corporation with fresh terms and conditions. The Salami amount of lease for each shop was fixed at the rate of Rs. 1,000/- for each sq. ft. area of the shop. The annual ground rent of the shop was fixed at the rate of Re. 1/- per sq. ft. Interested persons/firms/institutions were required to apply in the prescribed form attached to the brochure giving preference for 3 shops. Some of the important conditions, regarding the payment of Salami amount and consequences on failure, incorporated in the brochure, being condition Nos. 14 and 16, which are relevant for purposes of this petition are noticed hereunder:
14. Out of the total Salami deposit amount, 1st installment of 25% amount will he payable within one month time as 1st installment the 2nd installment of 50% within four months lime and the last and 3rd installment of 25% within 6 month’s time from the date of issue of allotment letter to candidates through a crossed Bank Draft in favour of Page 2401 B.S.T.D.C. payable at Patna. However, the possession of the shop shall be given to party only after the payment of 2nd installment i.e. after payment of 3/4th amount of Salami.
16. If the allottee fails to deposit 1st installment within stipulated 2 months after issue of allotment letter, his earnest money shall be forfeited. If allottee fails to deposit 2nd installment after depositing 1st installment within stipulated 6 months of allotment letter; his first installment deposit shall be forfeited. And if the allottee fails to deposit last installment of 25% within 2 months of taking possession or six months of issue of allotment letter which ever a later and/or does not start business withing this period. His allotment shall be cancelled & 1st installment of 25% paid by him shall be forfeited.
The last date of submission of application form was 20.6.1989 till 5 P.M. Petitioner applied for allotment of shop and gave his preference for shop No. 1 and also got himself registered by paying Rs. 250/- and also deposited earnest money of Rs. 5000/- for participating in the draw of lottery as per the requirement of brochure. Lottery was drawn on 6.8.1989 and petitioner was found successful in draw of lottery in respect to shop No. 1. Vide letter No. 1331/89 dated 5.9.89 petitioner was communicated about draw of lottery in his favour in respect to shop. He was asked to deposit 1/4th amount through Bank Draft within one month and also to convey his consent within one month. Petitioner conveyed his consent on receipt of the said communication. On the basis of rates fixed in the brochure, the total amount payable by the petitioner for the shop was determined at Rs. 2,61,970/- as the area of the shop No. 1 was 261.97 sq. ft. The amount of Salami was payable by the petitioner in three installments-1st installment being for Rs. 65,492.50/-, 2nd installment for Rs. 1,30,985/- and 3rd installment for Rs. 65,492.50/-. Sum of Rs. 66,000/- being the 1st installment was paid by the petitioner vide bank draft dated 25.9.1989. Petitioner paid further amount in the following manner:
Rs. 40,000/- vide bank draft dated 2.2.1990, Rs. 66,000/- vide bank draft dated 3.2.1990 and Rs. 50,000/- vide bank draft dated 9.4.1990.
Petitioner vide letter dated 3.2.1990, requested the respondents to hand over the key of the shop. Vide another letter dated 9.4.1990, accompanied with the draft of Rs. 50,000/-, petitioner again requested to make arrangement for handing over the shop to him and also stated that the balance amount shall be paid within one month from handing over the possession of the shop. It is alleged by the petitioner that the construction of shops was completed by the respondents in the year 1991-92 and thus respondents did not hand over the possession to the petitioner and other allottees. It is also alleged by the petitioner that vide letter dated 16.8.1991 petitioner was asked to appear in the office of respondent No. 1 and to execute the agreement. When the petitioner approached the office of respondent No. 1, he was handed over a copy of the agreement. It was found that the Salami amount was fixed at Rs. 1400/- per sq. ft. as against Rs. 1000/- fixed in the brochure per sq. ft. Similarly, the ground rent payable at the rate of Re. 1/- per sq. ft. per year was also changed to Re. 1/- per sq. ft per month. Similarly, maintenance charge fixed at the rate of Re. 1/- per sq. ft. of each shop per month under Clause 19 of the brochure was also enhanced to Rs. 1.50/- per sq. ft. per month. Petitioner protested this unilateral enhancement but respondents did not bother. Petitioner Page 2402 again approached the respondents, vide letter dated 6.5.1997, along with bank draft of Rs. 64,750/-, drawn on State Bank of India, but the respondents refused to accept the amount. Petitioner has placed on record copy of this letter as also the Xerox copy of the bank draft. He also filed an application dated 6.5.1997 stating therein that he has been visiting the office of respondent No. 1 and asking for handing over the possession of the shop and also to accept the money but nothing has been done. He again requested to hand over the possession of the shop, execute the agreement and receive the amount. It is stated that petitioner came to know that the shop allotted to the petitioner has been illegally allotted to respondent No. 4. On coming to know this fact, petitioner approached for issuance of copy of cancellation of his allotment and also for copy of allotment made in favour of respondent No. 4. He filed a detailed application dated 6.4.1998 to the Managing Director of respondent No. 1 protesting the allotment of shop No. 1 to respondent No. 4 and also asked for the copy of cancellation of his allotment and allotment of respondent No. 4. In this letter, petitioner has specifically mentioned about the amounts paid by him. It is under these circumstances petitioner has filed this petition seeking a direction in the nature of mandamus commanding upon respondent Nos. 1 to 3 to hand over the possession of the shop No. 1 to the petitioner and restraining the respondents from allotting/handing over the shop to respondent No. 4 and other relief.
2. The main contentions of the petitioner are: that in terms of Clause 14 of the brochure, respondents were bound to hand over the possession of shop to the allottee on payment of 2nd installment and since the shops had not been constructed till 1990-91, the possession was not handed over even though the petitioner had paid 1st and 2nd installments. It is further slated that in the year 1991, respondents arbitrarily enhanced the amount of Salami, ground rent and maintenance charges. It is further stated that allotment made in favour of respondent No. 4 in respect of shop No. 1 is totally illegal and arbitrary and the possession of the shop is required to be handed over to the petitioner. It has also been mentioned that under the brochure a person is entitled to only one shop whereas respondent No. 4 has been allotted four shops i.e. shop Nos. 1, 14, 15, and 16.
3. Respondent Nos. 1 to 3 and 4 have filed their separate counter-affidavits besides challenging the maintainability of the writ application on the ground that it involves contractual obligations. It is stated that the installments were not paid by the petitioner as per the criteria/condition laid down i.e. within the time stipulated. It is also stated that the petitioner was asked a number of times to pay the balance amount and for that reliance is placed upon letter dated 26.3.1990, letter dated 27.2.1991, letter dated 16.8.1991 and letter dated 28.12.1991 which are annexed as Annexure-C series with the counter-affidavit of respondent Nos. 1 to 3. In paragraph-6 of the counter-affidavit, filed by respondent Nos. 1 to 3, it is mentioned that possession of the shop was to be given only after the payment of 2nd installment i.e. 3/4th of the total amount which comes to Rs. 1,96,477.50/-. It is further mentioned that petitioner was required to deposit the 2nd installment being Rs. 1,30,985/- by 4.1.1990 and the 3rd installment of Rs. 65,492/- by 4.3.1990. However, petitioner failed to deposit the installment and committed default. Various letters referred to above are said to have been issued for depositing the balance amount. In paragraph 10 of the Page 2403 counter-affidavit, it is mentioned that since the petitioner did not deposit the full amount of settlement and consequently deposit made by the petitioner was forfeited and allotment had been cancelled as per Clause 16 and a decision was taken for a fresh settlement of the shop. In paragraph 11, it is further mentioned that fresh advertisement was published in newspaper inviting offers and ultimately the said shop has been allotted to respondent No. 4 on 29.3.1998. Respondents have further stated that action of Corporation in forfeiting the deposits of the petitioner and canceling the allotment and subsequent allotment of the same to the respondent No. 4 is proper and justified. Respondent No. 4, who is the beneficiary of the shop, while reiterating the ground of default, committed by the petitioner in payment of installments, stated that this respondent entered into an agreement with respondent No. 1 on 27.1.1998 and he paid Rs. 5,62,960/- by way of 1st installment. It is further stated that respondent No. 1, vide its letter dated 29.3.1998, has asked this respondent to complete the payment of entire amount i.e. Rs. 14,06,600/- for shop Nos. 1, 14, 15, and 16. Since he had paid Rs. 5,62,960/-, he was to pay an amount of Rs. 8,43,960/- by way of 12 equal installments of Rs. 70,330/- in compliance to the letter of the Corporation dated 29.3.1998. According to this respondent, the amount was paid by 12 post-dated cheques for which receipt was issued to him and sent vide letter dated 20.4.1998. This respondent was asked vide letter dated 24.4.1998 to take possession of the shops in question and vide letter dated 6.5.1998, he was asked to execute the agreement. It is further stated that respondent No. 4 was again asked vide letter dated 26.2.1999 to appear before the Corporation on 8.3.1999 and execute the agreement. This respondent has also relied upon lease deed dated 12.3.1999, executed between the Corporation and respondent No. 4, in respect to four shops numbering 1, 14, 15, and 16. Further case of respondent No. 4 is that since the agreement between the petitioner and the Corporation stood terminated in the year 1990 itself, negotiation was held between the respondent No. 4 and the Corporation and accordingly shop was allotted to respondent No. 4.
4. I have heard learned Counsel for the parties at length.
5. Mr. A. Allam, learned Counsel appearing on behalf of the respondent No. 4, has referred to and relied upon [National Highways Authority of India v. Ganga Enterprises and Anr.] and [Orissa State Financial Corporation v. Narsingh Ch. Nayak and Ors.] to contend that High Court cannot interfere even if there is a breach of contract as the issue relates to contractual obligations. In the First case referred [National Highways Authority of India (supra)], wherein in the NIT there was a condition for furnishing of bank guarantee and its encashment if the bidder withdraws the offer before its acceptance or fails to furnish the performance security. Bidder withdrew from the bid during the validity period and accordingly his bank guarantee was encashed which order came to be challenged. The Apex Court considered the issue and held that bank guarantee itself constitutes an independent contract. It is further held that disputes relating to contract cannot be agitated under Article 226 of the Constitution of India. In the latter case [Orissa State Financial Corporation (supra)] proceedings under Section 29 of the State Financial Corporations Act, 1951 were challenged. In the said case, a notice for auction sale of a vehicle financed by the Corporation was challenged in a writ application and the High Court by quashing notice issued directions for grant of Page 2404 fresh loan for purchase of a new truck and enter into an agreement for realization of the balance loan amount as also to write off a part of the loan amount. It is under these circumstances, Hon’ble Supreme Court held that High Court should not have issued such directions in contractual matters in exercise of writ jurisdiction under Article 226 of the Constitution of India.
6. In the case of R.D. Shetty v. International Airport Authority , the Apex Court observed:
11. Today the Government in a welfare State, is the regulator and dispenser of special services and provider of a large number of benefits, including jobs, contracts, licences, quotas, mineral rights, et. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They arc steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grams for political sufferers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Governments and local authorities. Licences are required before one can engage in many kinds of businesses or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largesse in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money an them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilization by private corporations and individuals by way of lease or licence. All these mean growth in the Government largesse and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver? We do not think so. The law has not been slow to recognize the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection. Some interests in Government largesse, formerly regarded as privileges, have been recognized as rights while others have been given legal protection not only by forging procedural safeguards hut also by confining/structuring and checking Government discretion in the matter of grant of such largesse. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largesse in its arbitrary discretion or at its sweet will. It is insisted, as pointed out by Prof. Reich in an especially stimulating article on “The New Property” in 73 Yale Law Journal 733, “that Government action be based on standards that are not arbitrary or unauthorized”. The Government cannot be permitted to say that it will give jobs or enter into contracts or issue Page 2405 quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largesse and it cannot act arbitrarily. It does not stand in the same position as a private individual.
7. In the case of Kasturi Lal etc. v. The State of Jammu and Kashmir and Anr. , following the dictum of Ramana Dayaram Shetty, the Apex Court held:
11. So far as the first limitation is concerned, it flows directly from the thesis that, unlike a private individual, the state cannot act as it pleases in the matter of giving largess. Though ordinarily a private individual would be guided by economic considerations of self-gain in any action taken by him, it is always open to him under the law to act contrary to his self-interest or to oblige another in entering into a contact or dealing with his property. But the Government is not free to act as it likes in granting largess such as awarding a contract or selling or leasing out its property. Whatever be its activity, the Government is still the Government and is, subject to restraints inherent in its position in a democratic society. The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in an unprincipled manner; it has to be exercised for the public good. Every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if its fails to satisfy either test, it would be unconstitutional and invalid.
8. In the case of Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors. the Apex Court observed as under:
It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case.
9. In [Food Corporation of India v. Kamdhenu Cattle Feed Industries] , Hon’ble Supreme Court held as follows:
In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: Page 2406 A public authority possess powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‘fairplay in action’. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State action. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given cases. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, us it is unrealistic, but provides for control of its exercise by judicial review.
10. In [Association of Registration Plates v. Union of India and Ors.] the Apex Court observed that:
Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors.
11. From the conjoint reading of various judgments referred to and relied upon by the learned Counsel for the parties, as noticed hereinabove, it emerges (i) the High Court should be loath in exercising power of judicial review in enforcing purely contractual obligations (ii) contracts by the Government or its instrumentalities cannot be placed at par with those between the private parties (iii) the State or its instrumentalities are under constitutional obligation too act fairly, non-arbitrarily even in contractual matters, meaning thereby that the State action should be in public interest, fair, reasonable and reasoned.
12. With a view to apply the tests laid down by the Apex Court in some of its judgments including above referred, it is necessary to examine some of the facts in the present case. It is not in dispute that respondent-Corporation issued brochure inviting offers for allotment of shops in the proposed commercial complex at Ranchi. Petitioner was one of the participants in the process and completed all the necessary conditions like registration, deposit of earnest money etc. Allotment was made by draw of lots amongst the qualified applicants which is definitely a fair and valid procedure. It is also admitted case of the parties that shop No. 1 was allotted to the petitioner and he deposited the 1st installment within the stipulated period. It is also not in dispute that the payment of amount of 2nd installment was in stages and beyond the stipulated time. It is equally a fact that the respondent-Corporation accepted all the payments made between 2.2.1990 to 9.4.1990 as against the stipulated period of 4.1.1990. Not only that the payments Page 2407 made by the petitioner beyond the stipulated period were accepted by the respondent-Corporation, it also issued letters dated 26.3.1990, 27.2.1991, 16.8.1991, and 28.12.1991 asking the petitioner to pay the balance amount. The plea of payments beyond the stipulated period and its consequences envisaged under the brochure raised by the respondents does not seem to be valid. At the first place, belated payments of 2nd installment were accepted without any reservation. Not only this, even demands were made up to 28.12.1991 for payment which clearly establish that the respondent-Corporation never enforced Clause 16 of the brochure and accordingly condoned the delay by accepting the belated payments and by raising a demand even thereafter up to 28.12.1991 when the stipulated period itself expired on 4.1.1990. Though respondent-Corporation stated that in terms of Clause 16 of the brochure, the installments of the petitioner have been forfeited and allotment was cancelled but neither any cancellation order nor any order of forfeiting the installments paid by the petitioner has been placed on record. On specific question asked by the Court whether any such order of cancellation and forfeiture has been passed, learned Counsel for respondents has not been able to show any such order having been passed by the Corporation till date.
13. There is another important aspect. Corporation as also the private-respondent No. 4 heavily relied upon a fresh advertisement (Annexure-D), issued by the Corporation, inviting fresh offers for the remaining shops in the same complex. This advertisement was issued in 1996. It is specifically mentioned that out of 15 shops/offices, on the ground floor 10 shops/offices were available for allotment. The last date of making offer was 15.3.1996. There is nothing on record to show nor any material has been placed by the respondents that the petitioner’s shop No. 1 was also one of the shops which was subject-matter of fresh notice inviting offers.
14. This fresh notice also indicates that either shops had not been completed in the year 1989 when initially offers were invited or there were no takers of these shops. It appears that this fact finds strength from various letters written by the Corporation asking the petitioner to pay the balance amount even till the end of 1991. Under such a situation, the plea of the petitioner that shops were constructed in the year 1991-92 seems to be correct. Respondents have further stated that pursuant to the 2nd notice inviting fresh offers issued in the year 1996 the shop No. 1 was settled in favour of respondent No. 4. This fact also stands belied from the facts and materials on record. It is not the case of any of the respondents that respondent No. 4 made fresh application and applied for allotment of shop No. 1 pursuant to fresh notice issued in the year 1996 and consequently the shop was allotted. Rather the allotment letter dated 29.3.1998 relied upon by the respondents clearly indicates that all the four shops were allotted to the Respondent No. 4 pursuant to his application dated 27.3.1998 for Rs. 14,06,600/-. It appears that all the four shops were allotted to respondent No. 4, without his participating in the process of allotment, either on the basis of 1st brochure or even the 2nd notice issued in the year 1996 and respondent No. 4 has been allotted all the four shops in the year 1998 itself on his application made on 27.3.1998 without adopting any valid and legal procedure and without providing opportunity to other persons. This appears to be a settlement between the Corporation and the respondent No. 4 de hors the accepted and prescribed norms like inviting applications and providing opportunity to all the eligible persons. The entire Page 2408 exercise is fishy one, smacks of arbitrariness, favouritism and is in complete contravention of Article 14 of the Constitution of India. Nothing has been brought on record to show how the four shops have been allotted to one single person or a firm, how the price was fixed, what was the mode of allotment, how many applicants were there, how the respondent No. 4 was selected for allotment. Court has no difficulty in arriving at a conclusion that the allotment made to respondent No. 4, not only of shop No. 1 but also other shops, is totally illegal. It may also be looked from another angle, if respondent No. 4 has been allotted four shops in the year 1998 without following any procedure how and why the request of the petitioner for accepting the amount of 3rd installment in the year 1997 has been declined on the ground that his payment is beyond the stipulated period. It is a clear case of respondent No. 4 that all the shops were allotted to him in the year 1998 and he made the 1st payment of Rs. 5,62,960/- in the year 1998 and for balance amount 12 post-dated cheques were issued. If respondent No. 4 was a participant in the allotment process in the year 1989 or even in the year 1996 he would have definitely paid some amount out of total payable amount of Rs. 14,06,600/- by way of 1st or 2nd installment either in the year 1989-90 or 1996-97. Since the entire amount was paid in the year 1998 itself, it becomes apparent that these allotments were totally a favour to respondent No. 4, ignoring all the norms and rules as well as in violation of Article 14 of the Constitution of India by adopting pick and choose method. In this view of the matter, not only the allotment made in favour of respondent No. 4 is illegal and invalid in respect to shop No. 1 but other shops also. Since the writ petition involves the allotment of shop No. 1 only, I declare the allotment of shop No. 1 in favour of respondent No. 4 as totally illegal and invalid. From the facts on record, it is also evident that the petitioner has not been given a fair treatment and without canceling his allotment he has been denied the possession of shop No. 1 even though he was willing to pay the last installment of Rs. 65,492/-. Petitioner has paid 3/4th of the amount and it does not seem that a person who has paid 3/4th of the amount will not pay only 25%. Otherwise also petitioner has placed on record Xerox copy of the bank draft prepared by him in the year 1997 which fact has not been denied by the other side.
15. In view of the totality of the circumstances, I allow this writ petition with the following directions:
(i) Petitioner shall deposit Rs. 65,492/- with interest at the rate of 6% from March, 1990 till the date of judgment within one month from today (ii) Respondent Nos. 1 to 3 will lake over the possession of shop No. 1 from respondent No. 4 and hand over the possession to the petitioner within four weeks from the date of receipt of the amount of 3rd installment and (iii) it is open to respondent Nos. 1 to 3 to offer any other available shop in the complex to the petitioner, who may elect to accept the same. In such an eventuality, above directions need not be enforced. (iv) Petitioner is also at liberty to ask for refund of entire amount. If so desired, he shall make an application to the Managing Director of the Corporation within one month and on receipt of the application, Corporation shall refund the entire amount of 1st and 2nd instalments to the petitioner with interest at the rate of 6% from the date of deposit till payment. Amount shall be refunded within one month from the date of receipt of application from the petitioner. In view of the facts and circumstances, no order as to costs.